A current account deficit is a capital account surplus. Persistent deficits shift the balance between Asset vs Export sectors, dumping the export sector and pumping the asset sector. Put differently, we can pay for imports with shit that we make or shit that we own -- and this has implications for people in our country who make shit vs own shit.
A better analogy for the trade deficit would be sitting on the couch slamming potato chips and observing the shift in our body away from muscles and towards fatty tissue. Should we be excited to see this example of specialization in action? Is it wrong to want to fix our diet and push our body composition in the opposite direction?
The context here is that president Trump has an interesting view of trade deficits / surpluses. Specifically, he frequently cites cases where the US has a trade deficit with another country -- where the US is spending more in that country than that country is in the US -- as if that country is "taking money" from the US.
This is a bit peculiar, because it ignores the whole "the money we are spending is being exchanged for goods that come back to the US" part of the trade. I.e. I don't have a trade deficit with the grocery store, I just buy my groceries.
Actually you, like most of us, have a trade deficit with the grocery store and the movie theater, and a trade surplus with your employer. Which one is more enjoyable to have?
The United States proposed a deal to France, Germany, Japan, and Britain (the G5): you buy up your own currencies, the dollar falls, and in return we reduce our budget deficit, meaning you no longer have to effectively finance U.S. development.
The United States agreed to reduce its budget deficit and lower interest rates. The other parties to the agreement committed to raising theirs. In addition, West Germany agreed to cut taxes, while Japan agreed to allow the yen to appreciate. As a result, over the following two years the U.S. dollar fell by 46% against the German mark and by 50% against the yen. However, the U.S. government ultimately failed to reduce its budget deficit. Meanwhile, the sharp appreciation of the yen made Japanese exporters less competitive in foreign markets. In the United States, by contrast, the period following the agreement saw substantial economic growth and low inflation.
A classic American move: promise the world — we’re all in this together, we’re marching toward a brighter future — and then screw everyone over.
The most impressive thing about Trump is that he managed to shorten up the feedback loops on an overwhelming number of his policies.
You would expect the US industry to silently absorb his trade policies and only break decades after he leaves. Somehow, they aren't healthy enough for that.
People are very quick to make kneejerk reactions to tariffs while assuming the other guys have different opinions.
The Biden admin went after Canada repeatedly for unfair trade practices, and issued a blanket 10% tariff on Chinese goods.
The only difference is to what degree they wield the tariff hammer, and in which direction it is swung.
The one thing the current admin does have a point on is non-tariff meddling. Numerous countries make it almost impossible to sell goods in their countries while the same is not true in reverse, or they levy a high price in garbage regulatory fees (see the EU's new packaging identification directive that completely destroys small business), or in completely made-up fines for vague behaviors not even they can define (see the EU's DSA which is exclusively used against monopolizing American companies while completely ignoring monopolist and predatory EU ones like Booking.com).
This is a pretty reductive take. If a nation works 6 days a week, 12 hours a shift then obviously they will outcompete any nation where people work 5 days a week for 8 hours.
Protecting workers from that kind of competition seems fair. Tariffs aren't bad in itself. They are just a tool.
Unfortunately fools wielding a tool like this can cause a lot of damage, but that's true for any tool.
The comic satirizes the 2026 US tariff rationale, vs. worker protection tariffs. But I do often think about Noam Chomsky's opposition to NAFTA[0] when talking heads explain why tariffs are bad.
"If a nation works 6 days a week, 12 hours a shift then obviously they will outcompete any nation where people work 5 days a week for 8 hours." - This is not obviously true to me, can you explain why it is for you?
Although it is not a law of nature, and it is not linear across the hours.. In general if I work M-F more work will be done that if I just work on Monday morning.
Imagine a factory line where each worker makes 10 items per hour.
In, say, China a worker doing 996 will make 720 items. Te average working hours in the Netherlands are 36 hours or so per week. Making 360 items.
As long as there is free trade the Chinese factory will simply outproduce the Dutch one since they utilise their capex better.
Obviously European workers can't be reasonably asked to compete in an open market when labour laws, salary, health inspection etc... in China are at a 1920 Dutch level.
At second approximation, the <Dutch> factory in that example might make a larger number of items per hour because the workers are more alert and concentrated and make less mistakes. So the <dutch> factory and the <chinese> factory might actually be producing the same number of items.
Of course then there's more steps to this, and you need to start actually looking at systems and what you're optimizing for etc etc.
Not everything is factories. For instance, if your operator is operating a large crane that's lifting a 100 ton oil platform, maybe you'd prefer them to be wide awake and on the ball, regardless.
So this is just not correct.
First off a factory can run 24/7 regardless of the shift length, which is what will determine the total productivity.
Second off it assumes there are no trade offs in terms of more errors or anything else by having longer shifts.
Third off it assumes that factories in different countries are going to be equally effective with each other, instead of different nations/areas within nations specializing in certain areas.
It also ignores the economic benefits that come with having people in your nation having more leisure time, higher education, more time with children, etc. It's a very simplistic model that is also very incorrect.
You seem to be assuming that productivity scales linearly with time spent working, which doesn't seem to inherently be true.
If your factory workers spend twice as long working, it's likely that more widgets will get made. I'm not certain you can generalize too far from that, though.
Just as a note: if you work 6x12 shifts, you're actually working less efficiently, because you'll be regularly fatigued, make more mistakes, need more rework, etc etc. You might end up with the same net yield as if you'd done 3x6 hour shifts.
(edit: And only if you don't fall asleep at the controls and destroy the factory first. 12 hour shifts are brutal. At least one place I know bans you the next day if you exceed 11h, for your own protection if nothing else)
Unfortunately in our hyper partisan, sound bite, climate you can’t discuss the trade offs of tax policies anymore you either support the party line or you’re the enemy.
It would certainly help if people wouldn't believe flat-out lies.
Like, "other countries pay the tariffs."
No. They don't.
How can we have nuanced conversation about the trade-offs, if the leader of one political party blatantly lies about a fundamental detail of how tariffs work?
600% reduction in the price of drugs?
We can't even start a discussion with people who believe this. At all. They reject any information, even their own knowledge of how numbers work.
I totally agree trade should feel fair. If the US sends jobs, money, food or goods to other countries, then we shouldn't get garbage back.
Tariffs are a way of warning other countries "don’t take us for a ride." They help American workers, factories and towns that were hurt when jobs went overseas.
Tariffs shouldn't feel like hurting yourself for no reason. They are an important tool for standing up for yourself when other countries (to say nothing of bad trade deals) want to take advantage of you
Tarrifs are the worst decision a politician can make.
The main reason we have open-ish border for people and goods is to reduce the risk of war. You are not going to wage war with a country that do business with.
https://en.wikipedia.org/wiki/The_Belly_and_the_Members
A better analogy for the trade deficit would be sitting on the couch slamming potato chips and observing the shift in our body away from muscles and towards fatty tissue. Should we be excited to see this example of specialization in action? Is it wrong to want to fix our diet and push our body composition in the opposite direction?
https://yalebooks.yale.edu/book/9780300261448/trade-wars-are...
This is a bit peculiar, because it ignores the whole "the money we are spending is being exchanged for goods that come back to the US" part of the trade. I.e. I don't have a trade deficit with the grocery store, I just buy my groceries.
https://finance.yahoo.com/economy/policy/articles/trump-brag...
https://en.wikipedia.org/wiki/Plaza_Accord
The United States proposed a deal to France, Germany, Japan, and Britain (the G5): you buy up your own currencies, the dollar falls, and in return we reduce our budget deficit, meaning you no longer have to effectively finance U.S. development.
The United States agreed to reduce its budget deficit and lower interest rates. The other parties to the agreement committed to raising theirs. In addition, West Germany agreed to cut taxes, while Japan agreed to allow the yen to appreciate. As a result, over the following two years the U.S. dollar fell by 46% against the German mark and by 50% against the yen. However, the U.S. government ultimately failed to reduce its budget deficit. Meanwhile, the sharp appreciation of the yen made Japanese exporters less competitive in foreign markets. In the United States, by contrast, the period following the agreement saw substantial economic growth and low inflation.
A classic American move: promise the world — we’re all in this together, we’re marching toward a brighter future — and then screw everyone over.
Unfortunately the feedback loop in nations is much slower than in bodies.
You would expect the US industry to silently absorb his trade policies and only break decades after he leaves. Somehow, they aren't healthy enough for that.
Everyone has been optimizing to increase profits for decades. A 1950's US economy would have taken a lot longer to collapse.
The Biden admin went after Canada repeatedly for unfair trade practices, and issued a blanket 10% tariff on Chinese goods.
The only difference is to what degree they wield the tariff hammer, and in which direction it is swung.
The one thing the current admin does have a point on is non-tariff meddling. Numerous countries make it almost impossible to sell goods in their countries while the same is not true in reverse, or they levy a high price in garbage regulatory fees (see the EU's new packaging identification directive that completely destroys small business), or in completely made-up fines for vague behaviors not even they can define (see the EU's DSA which is exclusively used against monopolizing American companies while completely ignoring monopolist and predatory EU ones like Booking.com).
What were these practices?
Citation needed, I'm in the EU and there is small business
Protecting workers from that kind of competition seems fair. Tariffs aren't bad in itself. They are just a tool.
Unfortunately fools wielding a tool like this can cause a lot of damage, but that's true for any tool.
[0]: <https://chomsky.info/secrets03/>
Yes, because it's a one-panel comic.
Does the same hold for going from 5 days to 7 days or 8 hours to 16 hours?
A reasonable person should agree at some point adding more time will make people less productive due to lack of breaks, rest, etc.
Is it obvious where the line is? if so, where?
In, say, China a worker doing 996 will make 720 items. Te average working hours in the Netherlands are 36 hours or so per week. Making 360 items.
As long as there is free trade the Chinese factory will simply outproduce the Dutch one since they utilise their capex better.
Obviously European workers can't be reasonably asked to compete in an open market when labour laws, salary, health inspection etc... in China are at a 1920 Dutch level.
At second approximation, the <Dutch> factory in that example might make a larger number of items per hour because the workers are more alert and concentrated and make less mistakes. So the <dutch> factory and the <chinese> factory might actually be producing the same number of items.
Of course then there's more steps to this, and you need to start actually looking at systems and what you're optimizing for etc etc.
Not everything is factories. For instance, if your operator is operating a large crane that's lifting a 100 ton oil platform, maybe you'd prefer them to be wide awake and on the ball, regardless.
Tariffs aren't inherently bad, they're a tool.
If your factory workers spend twice as long working, it's likely that more widgets will get made. I'm not certain you can generalize too far from that, though.
(edit: And only if you don't fall asleep at the controls and destroy the factory first. 12 hour shifts are brutal. At least one place I know bans you the next day if you exceed 11h, for your own protection if nothing else)
It seems I've 'stung the wasps nest' on HN by not denouncing them outright it seems.
A scalpel is one thing.
Dynamite is something else.
I agree the current US strategy behind tariffs is pretty retarded. Good example of fools trying to use a powerful tool.
Like, "other countries pay the tariffs."
No. They don't.
How can we have nuanced conversation about the trade-offs, if the leader of one political party blatantly lies about a fundamental detail of how tariffs work?
600% reduction in the price of drugs?
We can't even start a discussion with people who believe this. At all. They reject any information, even their own knowledge of how numbers work.
Given the timing and the metaphor of blood being sent to and from a limb, this is almost surely a reference to the tariff threats against Canada.
Sorry, I'm European and can't keep up with the erratic US Gov. I read a summary at the end of the week.
Tariffs are a way of warning other countries "don’t take us for a ride." They help American workers, factories and towns that were hurt when jobs went overseas.
Tariffs shouldn't feel like hurting yourself for no reason. They are an important tool for standing up for yourself when other countries (to say nothing of bad trade deals) want to take advantage of you
The main reason we have open-ish border for people and goods is to reduce the risk of war. You are not going to wage war with a country that do business with.
This undermines this idea.
Open borders can be GREAT, but they can also be a point of vulnerability if we lose control of them